LAS VEGAS – Taking out a payday loan is rarely a good idea. Many companies charge high interest rates, and customers can easily get in a trap where they spend years paying off the loans.

If you get a payday loan, be warned. These companies may soon have more leverage over customers. Nevada law offers consumers some protections from payday loan companies, but that could change.

If Senate Bill 123 passes, it would allow payday loan companies that offer long-term loans to sue customers who default on their loans.

“Somebody can get sued after paying for twelve to fourteen months on this loan, and then get sued at the end for more interest,” said consumer advocate Venicia Considine.

Considine says this can hurt payday loan customers who are already strapped for cash.

“The average income nationally of people who go to payday loan lenders is about $22,400 a year,” she said.

Considine says she feels the current laws obligate lenders to ensure anyone they give money to can pay it back. Senate Bill 123 would change that, and it could keep people trapped in a cycle of debt for a long time.

“It’s a lose-lose for the consumer,” she said.

You can voice your opposition to the bill by contacting your state lawmaker.

If you are in trouble with payday loans, the Legal Aid Center of Southern Nevada can help. Their services are free.

If you have a problem you want investigated, contact 8 On Your Side at 702-650-1907.

It’s common knowledge you can save money by paying off loans and other debts quickly or ahead of schedule. You can also save money by making monthly payments as planned, if you put in a little extra effort and do the math.

The trick? You can change your repayment period to an extended plan (for example, a 25-year instead of a 10-year repayment period) but continue to pay the amount required to be debt-free within 10 years and request the extra payment go toward the principal balance. The amount you overpay reduces the interest you’ll pay over the life of your loan. Here’s where the extra effort is necessary: You should frequently follow up with your loan servicer and check your statements to make sure the extra payment is applied as you instructed.

Not crazy. It’s a smart plan, you just need to make sure you know what you’re doing.

“That post is completely on target,” said Mitch Weiss, a finance professor at the University of Hartford. He frequently writes about student loan issues for Credit.com and has written about this strategy as a good way to save money but also give yourself flexibility. “You can always fall back on that lower payment when you need it. Managing your cash flow is in your hands, then.”

In the post, the redditor provided a good example. He pays $636 each month on a 10-year repayment plan, and the required monthly payment would drop to $333 a month for a 25-year repayment plan. By continuing to pay $636 a month, the extra money would go toward the principal balance on the loan with the highest interest rate (he checked with his loan servicer, and that’s its policy — you’ll want to check with your own servicer to confirm if this is its policy as well). In the event he can’t afford the $636 some months, he can fall back on the lower required payment, rather than having to go the servicer and explain the hardship and try and work something out (or make a partial payment and get hit with late fees or skip a payment and get a delinquency on his credit report).

The redditor said he used a loan calculator and found that he’d pay off his debt two months faster and save more than $1,000 in interest that the loan would have accrued under the 10-year plan.

“Am I missing something here, or is this a no-risk way of saving $1,100 and 2 months? I mean it gives emergency flexibility AND saves me money?” he wrote.

As dozens of people replied (and Weiss confirmed), the math is correct, but when it comes to student loans, you need to be careful.

“It’s all about execution, and the way that you ensure execution is that you have your directions in writing and you follow up,” Weiss said. Tell your servicer exactly what you want them to do with that extra payment (put it toward the principal balance, and if there are multiple loans, the principal balance of the loan with the highest rate), and make sure they do it. Otherwise, they may take the extra payment as a future payment and just not charge you again until the prepaid amount runs out.

Another Reddit commenter said it took emailing his or her servicer every 48 hours for almost two months to make sure the servicer applied the payment as instructed. Weiss said he’s heard and read about that complaint a lot.

“It was a very constructive string of comments,” Weiss said. “I think this demonstrates how serious an issue this is for so many people and how so many people are taking this so seriously.”

As you pay down your student loans (no matter your strategy), it can help to keep an eye on your credit reports for any inaccuracies or problems that could drag down your credit score. You can get a free credit report summary, updated every 30 days on Credit.com, to track your progress as you get out of debt.

Andy Haste, the lender’s chairman, said: “Wonga can no longer sustain its high cost base, which must be significantly reduced to reflect our evolving business and market.

“Regrettably, this means we’ve had to take tough but necessary decisions about the size of our workforce. We appreciate how difficult this period will be for all of our colleagues and we’ll support them throughout the consultation process.”

Wonga employs a total of 950 people worldwide, but all the job losses relate to its UK payday loans business, which employs 650 people – about 280 in the UK, 175 in Ireland, 185 in South Africa and 10 in Israel.

It is understood about 100 jobs will go in the UK alone. All jobs will go in Ireland and Israel.

The group is aiming to achieve overall cost savings of at least £25m over the next two years, following a period of rapid expansion that saw costs treble between 2012 and 2014.

When Haste was appointed chairman last July, he said Wonga would become smaller and less profitable as it scaled back the number of customers it extended loans to, imposing stricter lending criteria.

Wonga also announced on Tuesday that its former chairman Robin Klein was stepping down from the board after eight years.

The payday loans industry is undergoing a major shakeup as regulators seek to make the market fairer for cash-strapped consumers.

Under the new rules announced on Tuesday, lenders will have to list their deals on price-comparison websites and make it easier for customers to compare the total cost of different loans offered by various lenders.

Payday lenders will also have to provide customers with a summary of the total cost of their loans, as well as how additional fees such as late repayment affect the cost.

The recommendations were made after a 20-month inquiry into the payday loans industry by the CMA.

The watchdog concluded that a lack of price competition between lenders had driven costs higher for borrowers, with most people failing to shop around partly owing to a lack of clear information on charges.

Simon Polito, who ran the inquiry, said: “We expect that millions of customers will continue to rely on payday loans. Most customers take out several loans a year and the total cost of paying too much for payday loans can build up over time.”

Interest and fees were capped at 0.8% a day, lowering the cost for most borrowers, while the total cost of a loan was limited to 100% of the original sum. Default fees were to be capped at £15 to protect people struggling to repay their debts.

Polito said: “The FCA’s price cap will reduce the overall level of prices and the scale of the price differentials but we want to ensure more competition so that the cap does not simply become the benchmark price set by lenders for payday loans.

“We think costs can be driven lower and want to ensure that customers are able to take advantage of price competition to further reduce the cost of their loans. Only price competition will incentivise lenders to reduce the cost borrowers pay for their loans.”

Joanna Elson, chief executive of the Money Advice Trust charity, welcomed the action from the CMA and FCA but added a note of caution: “This is good news for the consumer. More competition and transparency in the payday loan market will ensure that the FCA’s cap on the cost of credit remains precisely that– a cap, not the norm.

“This is a good example of regulators working together to bring about meaningful change in this sector. However, these improvements in the way that payday loans are regulated must not dilute the core message that payday lending remains an extremely expensive way to borrow,” she said.

Payday lenders will be forced to publish the details of their products on at least one price comparison website, authorised by the FCA. The CMA said on Tuesday it would work closely with the FCA to implement the new recommendations.

Obtaining a loan from the government now seems perfectly normal to most Americans, be the loans for education, business, healthcare, or whatever else.

Examples include Small Business Administration loans, where a potential business owner goes to the government to get startup cash, and student loans, where a college student borrows money for tuition or even living expenses. These loans can often be paid back with interest over the course of what is often several decades.

Other examples might include Federal Housing Administration (FHA), Veterans Administration (VA), or Rural Housing Services (RHS) loans, which differ from the former in the sense that they are government insured loans, yet the fundamental principle behind them remains the same: government is taking upon itself (via taxpayers) the risk behind making the loan.

Of course, private loans are also available, though those that do not employ government insurance or other subsidies usually come with higher interest rates. The higher interest rates in the purely-private sector come from the fact that the private entity making the loan must take on all the risk, instead of externalizing it to the taxpayers.

So, the reality of lower interest rates in government and government-subsidized loans means they are vitally necessary, right?

First of all, the government doesn’t “make money,” in the way that private entities do. There is only one way in which states initially accumulate revenue, and that is through taxation. This extorted wealth is originally made in the private sector. So, in order for a government to make a loan back to the private sector, that money must first be removed from the private sector via taxation.

Government Knows How To Best Spend Your Money

For private entities, however, when they make a loan and determine who qualifies for it, and at what interest rate, the private firm making the loan is basically determining at what price (i.e, interest rate) the firm feels adequately compensated for the risk of lending out this money, and for giving up direct control over that money for the duration.

To claim, therefore, that the government should be in the business of making loans because private loans are generally too costly or too inaccessible for buyers, is no different than saying that government must take individual’s money and use it in a way that the original owners (i.e., the taxpayers) themselves would determine to be reckless and irresponsible. While it is true that occasionally a government loan may be paid back with interest at the appropriate time, it would be absurd to suggest that politicians would be more knowledgeable about how a person’s money should be used than the person who originally created and owned the wealth in the first place.

But Government Should At Least Prevent Usury, Right?

Moreover, there are those who will say that private firms making loans should be restricted from charging “excessive” interest on their loans (i.e., usury). This is an example of a very well-meaning, but utterly damaging regulation. It is crucial to note the differences in time preference displayed by both the lender and the borrower. The lender’s time preference (in this case) is lower than that of the borrower’s, meaning that the lender prefers a larger sum of money in the future, and the borrower prefers a smaller sum now. To get money now, however, the borrower must pay for it in the form of interest.

This represents a healthy balance between lenders and borrowers. It is why loans are made. Laws passed that prohibit certain interest rates on loans are far more likely to hurt those who need the loans, than anyone else. As was previously stated, a firm or person making a loan must feel compensated for the risk of making the loan, and that compensation manifests itself in the interest rate. To restrict a firm from charging a certain percentage of interest on their loans will only reduce the amount of loans it gives out.

Taking Away Your Choices

If a potential borrower who is determined to be a rather high risk asks for a private loan, then their interest on that loan will be quite high, but at least in that situation, the borrower has the choice of taking the loan, or to not take the loan. In the end, the borrower will choose what he or she believes will most benefit him or her. Yes, the borrower might miscalculate and the loan might turn out to have been a bad idea, but at least the borrower had a choice.

On the other hand, if the amount of interest that could be charged on the loan were to be forced down via government regulation, then the firm or person making the loan would simply not offer the loan at all, as he or she would not feel their risk is justified by the legally-allowable interest rate.

Faced with a lack of loans, risky borrowers may then look to government and government-subsidized loans as an option, but we find here just another case of government offering itself as the (taxpayer-funded) solution to a problem it caused in the first place.

Image source: iStockphoto.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

The loan, plus interest and fees, is due on your next payday and is withdrawn automatically from your bank account. If a loan is defaulted, the lender can charge up to a maximum of 30 per cent per annum on the loan principle and up to $50.00 for a NSF cheque or if a pre-authorized debit is dishonoured.

“Sometimes people don’t have a lot of options when it comes to borrowing money,” says Cory Peters, the consumer credit division director for the Financial and Consumer Affairs Authority of Saskatchewan.

“We want to make sure that people are aware of the fees and re-payment timeframes that are associated with payday loans.”

The loan, plus interest and fees, is due on your next payday and is withdrawn automatically from your bank account. If a loan is defaulted, the lender can charge up to a maximum of 30 per cent per annum on the loan principle and up to $50.00 for a NSF cheque or if a pre-authorized debit is dishonoured.

“Sometimes people don’t have a lot of options when it comes to borrowing money,” says Cory Peters, the consumer credit division director for the Financial and Consumer Affairs Authority of Saskatchewan.

“We want to make sure that people are aware of the fees and re-payment timeframes that are associated with payday loans.”

To date, there are P608.63 million in delinquent accounts under the SSS stock investment and privatization fund loan programs

File photo

MANILA, Philippines – Despite the loan condonation program offered by the Social Security System (SSS) in the past, there are still some members who let their loans balloon under the Stock Investment Loan Program (SILP) and the Privatization Fund Loan Program (PFLP).

Thus, SSS is encouraging them to avail of the option to sell their shares of stocks under the said programs.

In the late 1980s, SSS offered the SILP to members as an opportunity to invest in the stock market.

As of end-2014, there are 3,037 delinquent SILP loan accounts, amounting to P304.44 million ($6.87 million), inclusive of penalties and interest.

In 1994, PFLP was offered to enable SSS members to participate in the initial public offering of Petron shares which at that time was entirely state-owned.

The PFLP was also open to SSS members who were interested in buying shares of stock of the Manila Electric Company (Meralco) that it was disposing at that time.

To date, there are 5,755 delinquent PFLP loan accounts, totaling P304.19 million ($6.86 million), with penalties and interest.

In September 2014, the Social Security Commission approved the option to sell shares of stocks to lessen these delinquent accounts that total over P608.63 million ($13.74 million).

How to sell shares

Under the option to sell shares, the member-borrower will execute a Special Power of Attorney authorizing the SSS to sell his shares of stocks at the prevailing market price, based on the quotation of an accredited broker and subject to the usual broker’s commission, taxes, and other fees.

Net proceeds from the sale of the shares of stocks will then be applied to the member’s outstanding SILP or PFLP loan balance.

“Any excess amount after application to the outstanding SILP/PFLP loan balance will be applied to his delinquent salary or housing loan, if any,” SSS senior vice president May Catherine Ciriaco said.

If none, or if there is still excess amount, then this will be refunded to the member-borrower, Ciriaco added.

The member though shall be required to pay the remaining amount either in cash, from a salary loan renewal, or from the final benefits (total disability, retirement, and death), if the net proceeds from the sale of the shares of stock are not sufficient to cover the outstanding SILP or PFLP loan balance.

However, the remaining balance will continue to be charged with interest and penalties until fully paid, SSS said.

Ciriaco clarifies that the option to sell shares is not the condonation program the members are waiting for, but it is the next best way for members to finally pay off their outstanding loans under the SILP and PFLP to ensure that they fully enjoy their SSS benefits without deductions. – Rappler.com

Fannie Mae and Freddie Mac both recently introduced programs to clearly define their lending standards and give homebuyers loans with as little as 3% down. This has prompted criticism from many people as to the safety and responsibility of this type of loan. After all, didn’t the abundant availability of low down payment loans contribute to the housing collapse?

While that’s definitely been true in the past, things are a little different this time around. There is a right way and a wrong way to let people become homeowners without a lot of cash up front, and it looks like Fannie and Freddie are getting it right this time.

The new loan programs Fannie Mae’s 3% down loan program is available right now, and is limited to first-time homebuyers, which are defined as anyone who has not owned a home in the past three years. And even if a borrower does not meet the “first-time” standard, a conventional mortgage can be obtained with as little as 5% down.

Freddie Mac’s 3% down program is called Home Possible Advantage, and will be available for settlement dates on or after March 23. Unlike Fannie Mae’s program, the Home Possible Advantage loan program is not limited to first-time buyers.

Both programs limit the low down payment options to single-unit primary homes. So, investment properties, second homes, and properties such as duplexes are disqualified.

What’s different this time around? Low down payments all by themselves aren’t necessarily a bad thing, if used correctly. And Fannie and Freddie are taking steps to make sure things are different this time around.

One big difference is that the low down payment loans are limited to standard (up to 30-year) fixed-rate mortgages. The “exotic” loan options that used to be widely available with little or no money down, such as interest-only and negative amortization loans, are a thing of the past. And adjustable-rate loans are not eligible for this option, to prevent cash-strapped borrowers from finding themselves in over their heads when the interest rate jumps.

The level of documentation required is another big difference from the housing collapse. Prospective homebuyers are now expected to be able to document every detail of their financial situation. In fact, it’s not uncommon for a mortgage application packet to consist of more than 100 pages of various income, employment, and financial documentation.

And finally, credit standards have relaxed in recent years but are still much higher than they ever were in the years leading up to the collapse. This is especially true for low down payment loans. According to Fannie Mae’s loan-eligibility matrix , a borrower needs a minimum credit score of 680 in order to qualify for a down payment of less than 25%, which is significantly higher than the 620 required for loans with higher down payments.

In a nutshell, the difference is that even though you can once again buy a home with a low down payment, borrowers are being held to a higher standard in order to do so.

If you want to become a homeownerIf you’re a renter and have been thinking of taking the plunge into homeownership, this could be the opportunity you were waiting for. In order to make the process go smoothly, there are a few things that you should do before applying for a loan.

For starters, you need to know where you stand credit-wise since the new loan programs require reasonably good credit. And, if your score is a little bit low, here are some suggestions on how to improve it . And, you should know exactly what to expect throughout the mortgage process and what lenders are looking for. You’ll not only need credit, but enough income to justify the loan, a solid employment history, and the ability to document your savings and other financial assets.

It could be a good catalyst for housing in 2015 Along with the already popular FHA loan options, there are now plenty of ways for people to become homeowners without large amounts of money down. And the new programs prompted the FHA to significantly lower its mortgage insurance premiums in order to remain a competitive loan option.

These loans seem to me to be less likely to contribute to another housing collapse, and could actually do a lot of good for the housing market. First-time homebuyers currently make up a much lower share of the market than they have historically, and if these new programs are successful, an influx of first-time buyers could go a long way toward a healthy U.S. housing market.

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Payday Loans Criticized at Grassroots Rallies in U.S.

Grassroots activists calling for stronger government limits on the payday loan industry took their message on Tuesday directly to the source: They protested in front of payday loan businesses at events in at least 10 states.

A member of the Colorado Progressive Coalition holds a sign calling for stricter policies governing the payday loan industry during a Tuesday rally in Denver. Photo source: National People’s Action

Their “ask” was straightforward: The federal government needs to protect consumers from an industry in which critics say offer high-interest, short-term loans that put millions of Americans in a debt trap.

The Consumer Financial Protection Bureau (CFPB) is considering new limits on the industry and collecting comments from consumers.

National People’s Action (NPA), which works on economic and social justice issues, helped organize the rallies.

“It’s time we started treating predatory payday lenders like the danger to our communities they truly are,” Liz Ryan Murray, NPA policy director, said in a statement.

“These high-interest lenders rob communities and families of their livelihoods and are every bit as toxic as an environmental disaster. The Consumer Financial Protection Bureau was created to protect working families from just this kind of abusive financial practice. Now, it’s time for action. The CFPB should implement real and lasting protections that will free consumers from the payday loan debt trap.”

Photo source: National People’s Action

The CFPB is expected to issue a proposal about the payday lending industry by the end of January. A final rule is expected later in 2015. The federal agency cannot regulate interest rates. But it could limit how long lenders can keep consumers in debt.

NPA said that 35 states permit some type of payday lending.

“While some states and cities have worked to pass local laws capping interest rates, federal laws still largely allow payday lenders to prey on vulnerable communities and benefit from borrowers’ financial hardship,” the grassroots group said in a statement.

NPA estimates that payday lenders earn $10 billion in annual fees by keeping about 12 million consumers in what they say is perpetual debt.

The annual interest rates for some loans can top 400 percent and there have been reports of lenders using pressure tactics against consumers so that they will continue to borrow more money, according to NPA.

COLUMBIA — Two men in hazardous materials suits approached the Quik Cash at 219 E. Broadway on Tuesday afternoon with a roll of yellow caution tape in their hands.

The men were “quarantining” what they consider a toxic payday loan business, joined by about 10 other consumer advocates and Grass Roots Organizing protesters hoping to incite changes in the practices of the payday loan industry.

The group chanted as cars drove by and honked their support.

“Say no to payday lender lies! They only want their fees to rise! They offer toxic loans to poor and wonder why we say no more!” the protesters shouted.

“We have been working on this issue for a long time,” organizer Robin Acree said. “We wanted to raise attention to the toxic loans in Missouri and the debt trap that they cause. They are taking advantage of a low-income workforce.”

The protesters said the businesses intentionally give loans to people who cannot afford to make the payments, add the high interest rates and continually loan out more money to pay for the original debt when the customer cannot pay.

Acree said she does not want the payday loans industry to do business in Columbia and would rather low-income wages be raised to prevent people from needing the loans.

The Rev. Joseph Wilson spoke at the protest representing Faith Voices of Columbia and told the protesters about his own problems with payday loans. He said he took out a loan for $700 for regular expenses and it took him almost three years and $3,500 to pay it off.

“We were fortunate to get out of it. I had several loans all around town under the stress of trying to get out of it, and I couldn’t,” Wilson said. “It was a trap, and if I’d have known then what I know now, I never would have done it. It’s not set up to get you out.”

New bills aiming to reform the payday loan industry entered both houses of the Missouri General Assembly earlier this month.

Senate Bill 187 would prohibit payday loan operators to charge interest and bar renewals on the loans, eliminating the current allowance of six renewals. Under the bill, payday loaners would only be able to charge fees that would be refunded to a borrower when a loan is repaid.

The bill would also extend loan periods to 30, 60 or 90 days from the current 14 and 31-day standards and prohibit lenders from making more than one loan to a single customer.

House Bill 91 would classify any loan less than $750 as a payday loan, up from the current $500 standard. It would allow for two loan renewals, but borrowers would not be allowed to have more than $750 in outstanding loans at one time.

It would also prohibit a lender from making a loan to a customer who already has one unsecured loan.

But the protesters weren’t looking to state legislators for help. They called through a megaphone for Consumer Financial Protection Bureau director Richard Cordray to make the changes that legislation has yet to accomplish.

“Payday loans are toxic! They make me sick! CFPD, show me logic and make rules quick!” they chanted.